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By the Numbers - Nitro Cold Brew Coffee

Posted on January 30 2018

Should You Buy Or Make Your Own Nitro Cold Brew Coffee?

With the continual growth and popularity of cold brew as a market segment, there are many new product developments, startup companies, and ways for a cafe to add cold brew to their menu.  One of the more popular trends we are seeing, are for cafes to borrow on loan (or sometimes make lease payments) on a full kegerator setup, and then pay for delivery of a finished cold brew product already kegged.  Sort of the hands off approach, fast-and-easy way to start selling cold brew.  But at what cost? More on that soon. 

As you already know, cold brew is premium product that fetches a premium price in cafes, chains, and grocery markets.  Generally, in a commercial setting, cold brew coffee is twice as expensive to make as traditional style iced coffee brewed as a concentrate and then crashed onto ice.  The cost of goods warrants the premium price.  

The cost of a delivered keg of cold brew, is approximately $95 from our research.  Delivery charges may also apply, as well as the cost of nitrogen.  However, I'd like to just look at the cost of the cold brew.  A five gallon keg yields 640 ounces of product.  That equates to 14.8 cents per ounce for finished product.  That means for a 12 oz serving, your cost is $1.78.  If you sell this for $4 before sales tax, your gross margin is 56%. That does not include the cup, lid, straw, and labor and waste to realize your net profit.

For comparison, if you make your own cold brew, your cost would be dramatically reduced, to 7.2 cents per ounce for finished product.  The 12 oz serving cost would be $0.86, and gross margin on the same $4 price would be 79% (you should like this).  

Looking at the numbers, from a profitability perspective, it seems like a slam dunk to make your own, yet we see cafe-after-cafe signing up for cold brew delivery.  Why?  The obvious reason is the "free" equipment.  No up front costs, start serving cold brew tomorrow.  I certainly get why this is attractive.  Although, I'd like to look at equipment costs, and what the breakeven point is for making your own cold brew, and the real cost to any cafe.

Equipment to Make & Serve Nitro Cold Brew

Kegerator* $799
Toddy Commercial System (w/50 filters) $95
Nitrogen Regulator (double gauge) $50
SS Stout Faucet $99
Nitro Coffee Keg Lid $59
SS Draft Tower $125
Nitrogen Tank (20 cubic feet) $99
Ball Lock 5-Gall Keg x 2 $180
Misc. Fittings, Hoses, etc $50
TOTAL $1556

 *Prices on kegerators vary greatly.  For comparison I selected a median price, and a model similar to those provided by the cold brew distribution companies.

Breakeven Analysis of Making Your Own Cold Brew

Keg Cost/Keg Cost/Keg Cost Keg Equipment
Delivered Made Savings $1556.00
1 $95.00 $46.00 $49.00 $1,507.00
2 $95.00 $46.00 $49.00 $1,458.00
3 $95.00 $46.00 $49.00 $1,409.00
4 $95.00 $46.00 $49.00 $1,360.00
5 $95.00 $46.00 $49.00 $1,311.00
6 $95.00 $46.00 $49.00 $1,262.00
7 $95.00 $46.00 $49.00 $1,213.00
8 $95.00 $46.00 $49.00 $1,164.00
9 $95.00 $46.00 $49.00 $1,115.00
10 $95.00 $46.00 $49.00 $1,066.00
11 $95.00 $46.00 $49.00 $1,017.00
12 $95.00 $46.00 $49.00 $968.00
13 $95.00 $46.00 $49.00 $919.00
14 $95.00 $46.00 $49.00 $870.00
15 $95.00 $46.00 $49.00 $821.00
16 $95.00 $46.00 $49.00 $772.00
17 $95.00 $46.00 $49.00 $723.00
18 $95.00 $46.00 $49.00 $674.00
19 $95.00 $46.00 $49.00 $625.00
20 $95.00 $46.00 $49.00 $576.00
21 $95.00 $46.00 $49.00 $527.00
22 $95.00 $46.00 $49.00 $478.00
23 $95.00 $46.00 $49.00 $429.00
24 $95.00 $46.00 $49.00 $380.00
25 $95.00 $46.00 $49.00 $331.00
26 $95.00 $46.00 $49.00 $282.00
27 $95.00 $46.00 $49.00 $233.00
28 $95.00 $46.00 $49.00 $184.00
29 $95.00 $46.00 $49.00 $135.00
30 $95.00 $46.00 $49.00 $86.00
31 $95.00 $46.00 $49.00 $37.00
32 $95.00 $46.00 $49.00 -$12.00

 

How Much Profit Margin Are You Willing to Give Up?

This chart shows that the breakeven point on buying your own equipment, making your own nitro cold brew coffee, versus using a delivery service is 32 kegs.  After your 31st keg, you will be reaping the rewards of owning your own cold brew equipment, and realizing that juicy 79% gross margin.  

Is 32 kegs that much? We don't think so.  Most busy cafes can easily move through 1 keg per week in winter months, and multiple kegs per week in the summer months.  That means in 3-6 months, you'll be glad you own your own equipment, banking over $3 per cup in gross profit!  

Did We Mention Quality Control?

Last but not least, not that we needed another check in the box, but the other glaring problem I see with delivered cold brew is product control and consistency.  For any cafe or coffee focused restaurant, you should be very concerned about what is in your keg, how it was made and transported, what ratio was used for dilution, what coffee was used, etc.  As cold brew distributors make decisions about their product and profit, you will not have full control over the product you are serving your customers.

Cold brew delivery and free equipment sounds great, and we can see the short-term appeal.  However, the best long-term strategy, for any cafe or restaurant, is to make the investment in your own equipment, and reap the long-term profits and maintain full control of what comes out of your tap.

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